Amidst much talk of an impending housing slump in Australia, a senior analyst has deemed the market as at Equilibrium, so is that a Fine Balance or Finely Balanced?
The supply of homes in Australia is “around equilibrium”, although dwellings are hugely overvalued, a property analyst says.
Institute of Actuaries Australia fellow Anthony Street is bucking the view of many in the sector on supply, saying a property bubble will be averted if prices remain stable.
While the property industry and banks talk about a shortfall of between 160,000 to 200,000 homes nationally, Mr Street says until recently Australia had more than enough homes to go around.
“There isn’t the massive undersupply that a lot of people in the property market would want you to think, but there isn’t a massive oversupply either,” the former Macquarie real estate securities funds manager told AAP.
“As more and more people moved out of home and the number of people per dwelling decreased, that accounted for what seems like an oversupply, so I think it’s probably around equilibrium at the moment.”
Mr Street said there had been a fall in the average of 2.5 people per dwelling, down from three in the 1980s and nineties.
Extra housing would have been taken up by a reduction in the number of people per dwelling.
But while the property industry expects the next national census to show an increase in the average amount of people under each roof, it’s been more than a year since the National Housing Supply Council released a report for the federal department of housing to assess the supply situation.
From an economic investment perspective, house prices were at least 30 per cent overvalued, Mr Street said.
But this would not be a concern until the commodities boom ran out of steam.
Still, house prices had “flat-lined” over the past six months and were even starting to fall.
A sudden increase in unemployment of two or three per cent could see house prices fall sharply.
However, if there was no movement over the next five to eight years, the stability could act as a correction due to improvements in income and affordability, Mr Street said.
Almost 10 per cent of homes were unoccupied during the last census, but the shortage of housing near the CBDs of Australia’s capital cities remains a headache for policymakers in the lead up to the August 9 census this year.
Caryn Kakas, executive director of the Residential Development Council of Australia, which represents major developers, said underlying demand was running at around 200,000 homes per year.
She said the upcoming census would likely show an increase in the amount of people living in the same home due to affordability and supply constraints.
“That would be a reversal of the occupational decline,” she said.
“From what we’re seeing in the housing sector, we wouldn’t be surprised to see that.”
“It’s going to occur because we are unable to deliver housing into the market at a price that a growing portion of the population can afford to pay which means people are delaying home ownership.”
The Commonwealth Bank estimates annual underlying housing demand will push back towards the 190,000 to 200,000 level where it sat a year ago.
“At the moment, given the slowdown in net overseas migration, it’s probably back around 170,000 to 180,000 range, but as the economy starts to recover and we start to get more demand, particularly from the resources sector with workers coming in from overseas, we’re likely to see that underlying demand pick up,” Commonwealth Bank economist James McIntyre said.